## Facts

- Voest-Alpine Trading USA Corp. contracted to sell Jiangyin Foreign Trade Corp. 1,000 metric tons of styrene monomer for $1.2 million.
- Jiangyin applied to Bank of China for a letter of credit to finance the purchase; the credit was issued and expressly made subject to UCP 500.
- The letter of credit contained typographical errors, including an incorrect ordering of words in the beneficiary’s name and a misspelling of the destination port.
- After the market price of styrene monomer fell, Voest-Alpine shipped the goods as contracted and presented the required documents to the presenting bank, which forwarded them to Bank of China.
- Bank of China acknowledged timely receipt but later sent a telex listing discrepancies (including minor name/port misspellings and an extra digit in the credit number on a document).
- The telex also indicated the bank was consulting the applicant about waiver of discrepancies rather than giving a clear, definitive refusal.
- Bank of China ultimately returned the documents and refused to honor the credit; Voest-Alpine sued for wrongful dishonor, and the case was tried to the court.

## Issues

1. Whether the issuing bank complied with UCP 500 requirements for timely, clear, and complete notice of refusal after presentation.
2. Whether the asserted documentary discrepancies were sufficient under letter-of-credit strict compliance, as applied under UCP 500, to justify dishonor.
3. Whether the documents, viewed as a whole, sufficiently evidenced the transaction such that minor clerical errors should not defeat payment.

## Decision

- The court entered judgment for Voest-Alpine after a bench trial.
- Bank of China wrongfully dishonored the letter of credit.
- Bank of China failed to provide a proper, clear notice of refusal within the period required by UCP 500 and thereby lost the ability to rely on discrepancies not properly noticed.
- Even apart from defective notice, the discrepancies were minor typographical or clerical defects that did not justify dishonor where the documents plainly related to the shipment and transaction.

## Legal Principles

- When a letter of credit is subject to UCP 500, the issuing bank must, within the prescribed time, honor or give a clear, unambiguous notice of refusal stating all discrepancies relied upon and handling the documents as required by UCP procedures.
- An issuing bank’s failure to give timely, definite, and complete notice of dishonor bars reliance on discrepancies not properly and promptly asserted.
- Strict compliance does not require rejection for trivial clerical or typographical errors when, in context, the documents clearly identify the beneficiary, shipment, and transaction and bear an obvious relationship to the credit.

## Conclusion

The court held that Bank of China was liable for wrongful dishonor because it did not provide a timely, unequivocal UCP 500 notice of refusal and, in any event, its refusal rested on immaterial documentary discrepancies that did not undermine the documents’ clear connection to the credited transaction.


Voest-Alpine Trading USA Corp. v. Bank of China, 167 F. Supp. 2d 940 (S.D. Tex. 2000)